The
5 nuclear tests carried out by India on May 11 and 13 have triggered strong condemnation
from Western nations, and economic sanctions from the USA and Japan. Many other countries,
such as Canada, Sweden and Australia have cut back development aid, and have threatened
more severe action unless India now signs the Comprehensive Test Ban Treaty (CTBT). INDIA
FOCUS spoke to many high-level people within the BJP government, industry, diplomatic
community, think tanks and media. We present our analysis and forecast of the likely
fallout.

BJP has gained politically: Domestic
public opinion is strongly in favour of India going nuclear, perhaps as high as 92 percent
according to some opinion polls. The only segment of society which has voiced its
opposition are the Communist parties and a few Left-aligned academics, intellectuals and
writers. Till such time that economic sanctions do not have an impact, or unless the BJP
regime draws India into another war with China (both are very unlikely) the BJP is likely
to gain support among urban middle-class, youth, government employees, ex-servicemen (who
number more than 10 million and are concentrated in North Indian states) and even farmers
(who identify with "nationalistic" issues). Most political parties have been
numbed into silence, and cannot go against popular opinion by criticizing the BJP. This
problem is perhaps most acute for the Congress party and its Italian-born president, Sonia
Gandhi: her foreign origin constrains her from saying anything which might be construed as
being pro-West or anti-India. Some other implications:

Prime Minister Vajpayee has become stronger vis-à-vis
the RSS faction in the BJP. Also, BJP has become stronger vis-à-vis its allies, and has
now taken charge of the governments agenda for the next 6 months.

Left parties are getting further isolated in Indian
politics and are now, very ironically, on the same side of the debate as the USA. They are
likely to lose support in local elections in West Bengal and in many university elections
in the coming months.

BJP will almost surely win local assembly elections in
Delhi, MP and even Rajasthan, all of which are to be held by the end of the year. It is
also likely that the BJP will try to exploit its growing popularity by calling early
elections in Uttar Pradesh. The Yadav community in UP is numerically strong, has a large
representation in the armed forces, and may now tilt towards the BJP rather than towards
the Samajwadi Party. If the BJP wins in all these 4 states then it may very likely rule at
the centre for its full 5-year term.

Senior US Officials Have Misread India:
Domestic politics was certainly a factor in the decision by the BJP government to go
nuclear, but not an over-riding factor as some US Senators and State Department officials
believe. Due to a particular clause in the CTBT India only had till September 1999 to
become a full nuclear weapons state, and any N-test after this date would have triggered
UN sanctions (which would have been far worse than unilateral sanctions). A number of
senior security and defense experts have been quietly and consistently telling successive
Indian regimes to either forsake nuclear options totally (and this unacceptable in India)
or to test the bomb now. As a matter of fact the planning for these N-tests
was initiated during the earlier UF regime, well before the BJP came to power. Second,
calling India a "poor country which hankers for false glory" goes down very
poorly with most Indians, and only hardens anti-West and anti-US postures. Third, US
legislators and the State Department also do not realize the extent of damage caused by
Robin Raphael to India-US relations. Raphael, who was Assistant Secretary of State for
South Asia in the first 4 years of the Clinton presidency, ruffled many feathers among
Indian political leadership (especially the BJP) with her pro-Pakistan remarks and what
many considered her insensitive and arrogant tone. But for her India may well have
informally committed itself to a test ban -- without actually signing the CTBT
-- way back in 1995.

India is playing the "China card" to
win support: Ever since the BJP regime came to power senior officials have been
harping on the threat to India from China, rather than from Pakistan (which is its
traditional enemy). The Defense Minister and the Chief of Army Staff have made frequent
statements about the need for a "strategic deterrent capability to counter emerging
nuclear and missile challenges to Indian security." This has meshed well with a
rising anti-China mood among Republicans (the House of Representatives has voted to ban
sale of missiles and satellites to China, and there are calls for President Clinton to
cancel his China trip). House Speaker Newt Ginrich, Henry Kissinger, Senator Moynihan and
Jimmy Carter are some of the leading public figures who have tacitly supported India, and
there is growing commentary within US media that anuclear India actually helps the
US contain China. In separate polls conducted last week by CNN and TIME magazine India
narrowly won out over China on the question: "Should the US support India or China in
case of a confrontation between the two ?"

India has tacit support of ASEAN:
Developing countries from SE Asia, Africa and Middle-East have either given no official
reaction or at most have shown only mild concern over the Indian N-test, and even
Indias other neighbours like Bangladesh and Sri Lanka have reacted very mutely. This
is in contrast to the strong language and actions used by Western powers. ASEAN countries
as a matter of fact secretly welcome a stronger India which can counter China -- the
entire ASEAN region is preoccupied with economic recovery in the aftermath of the Asian
currency crisis of 1997, and defense spending will be scaled down in the next few years --
and which can provide a balance of power in Asia. But they will be unwilling to publicly
support Indias entry in APEC and ASEAN in future should China oppose it, which is
now very likely.

China has been caught off gaurd, but may react
later: India-China relations are now at their nadir since the two fought a war in
1962, specially after the disclosure of the letter sent by the Indian Prime Minister to
heads of G-8 nations in which he mentioned Chinese nuclear & missile deployment as the
main justification for the Indian N-test. China is currently distracted by the Indonesian
crisis -- ethnic Chinese businessmen were the main target of attack, and many are now
fleeing that country -- and is restraining itself from any precipitous action which might
jeopardize President Clintons visit to China in July. But China may react to Indian
N-test and accusations by increasing its support to separatists in Indian north-eastern
states, which in turn will lead to more tension between the two countries. But having
signed the CTBT, and mindful of the increasing anti-China mood within the US, China is
going to be wary of raising the stakes too high.

Pakistan is caught in a fix: BJP may have
cleverly put Pakistan in a no-win situation. The current Pakistan regime will be in
political difficulty if it does not conduct a N-test soon, and in great economic
difficulty if it does (similar American and Japanese sanctions which will hurt its economy
much more than India). Senior Indian officials have publicly said that "Pakistan is a
sovereign nation, and it has every right to conduct its own N-test in keeping with its
security concerns," which is almost begging Pakistan to bite at this bait. In months
to come New Delhi can be expected to (deliberately) raise the temperature between the two
countries in order to provoke Pakistan into a nuclear race in which India knows it has an
edge. Pakistans best option may actually be to appease hard-liners with promises of
future N-test while extracting economic and military concessions from the USA, but
subcontinental rivalry is so deep that it is unlikely that Pakistan will be able to
restrain itself.

India has re-opened the debate on nuclear
disarmament: The biggest problem for the US is not the threat of an arms race in
South Asia, but the dilemma over how to treat India. India is now clearly a nuclear state,
but explicitly awarding it this status is both difficult and awkward since it means
reworking the 1968 Non-Proliferation Treaty. This will open a Pandoras box, and
other countries might well question the existence of any cut-off date in defining
nuclear status. Many commentators on BBC and CNN have, while disapproving of the Indian
N-test, actually sympathized with India over the "hypocrisy and
double-standards" of previous agreements such as the CTBT and NPT. The recent meeting
of foreign ministers of Non-Aligned countries also pointedly made no mention of Indian
N-tests, but instead renewed demands for global disarmament. There will now be an increase
in anti-nuclear activism in developed countries, and a push for complete nuclear
disarmament rather than selective entry into the nuclear club.

Sanctions will have limited impact in short term:
Sanctions by major Western powers do not directly affect trade, foreign investment,
portfolio investment, or other private sector deals. As things stand now the real impact
will be felt in the following ways: aid to Indian NGOs will be cut, dollar loans to Indian
firms will become more expensive, financial closure of infrastructure projects will be
delayed, foreign business delegations will be postponed, Indian currency may weaken
slightly, and stock markets will stay nervous. The most potential damage will be in power
projects, and to US companies: almost 40 percent of IPPs and EPCs are from the US, and a
large part of their business in India is financed/insured by the US EXIM Bank or OPIC.
None of this will have any significant impact in the short term, but if this problem
continues beyond 18 months then the stakes will very likely go up, and against India.
Foreign investors will start withdrawing, World Bank loans will dry up, and Indias
overall credit rating and investor confidence will decline. Also, having gone nuclear and
in the process becoming even more isolated in the world, India can no longer afford to
annoy MNCs by going against international commitments on IPR laws, import liberalization
etc. So, unwittingly, the BJP regime may have pushed India towards faster economic
reforms.

Crisis may be diminishing: There are
signs that international condemnation of India, and Indian isolation in the world, may
already be lessening. France, UK and Russia have refused to go along with US sanctions, US
companies have begun lobbying with the Clinton administration not to impose new (and
harsh) measures against India, Western nations such as Denmark and Netherlands have
quietly told their companies to continue investing in India, Japan has softened its
reaction in recent days (it has sent back to India its Ambassador whom it had recalled in
the immediate aftermath of the test, and has said that private Japanese investment to
India will not be affected by sanctions), the Indonesian crisis has pushed the Indian
N-test from front pages of newspapers (besides highlighting the economic importance of
India for foreign businesses), and a resurgence of anti-China mood in US politics has
taken away some momentum from US outrage towards India. The BJP government has also
started a (belated) damage-control exercise on two fronts: 1) expressing its willingness
to discuss signing CTBT, and 2) speedily clearing many (previously moribund) foreign
investment proposals in ports, power and hydrocarbon sectors. If India does accept the
CTBT -- and it increasingly appears likely that it will even though the actual process
will not be easy -- then it would be a personal triumph for President Bill Clinton who is
very keen to end his 8-year presidency with the CTBT in place. Economic sanctions against
India would then be lifted, or exist only in a theoretical sense. The crucial period to
watch is between July-August, that is after the Indian budget and Clintons visit to
China and before the end of the monsoon session of Parliament (BJP will want parliamentary
approval before accepting CTBT). President Clinton will visit India only if the BJP regime
promises to sign CTBT, else not.

Overall Assessment

The BJP regime took a high-stakes gamble, and it
increasingly looks as though the gamble has paid off. Western powers have realized that it
may be counter productive for them to react to Indias nuclear explosion with
rigorous sanctions or cancellation of World Bank loans since that may force India to
become even more confrontationist. India will escape with minimal damage, at least
economically, as long as it adopts a sober & serious dialogue with Western powers.
However, India is also unlikely to be invited to join APEC, ASEAN or UN Security Council.
With a boost to the moderate wing of the BJP, and the growing isolation of Left parties,
the overall political risk for foreign investors will improve in the medium to long term,
and India may open up more areas of its economy to foreign investors.

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